Buy to let changes – fairer or not?

9th July 2015

Buy to let changes – fairer or not?

 

The Budget brought some fundamental changes for Landlords, presumably to try to make the property market more accessible for first-time buyers. So what are these changes? 

Possibly the most significant change is the restriction of tax relief on mortgage interest for higher rate taxpayers. Currently, tax relief is given at a landlords highest rate of tax and so £1,000 of mortgage interest only costs a landlord paying additional rate tax £550 after tax relief, whereas it costs a landlord paying basic rate tax £800 after tax relief. The changes will mean that when the new rules, which are being phased in over 4 years, are fully effective, £1,000 of mortgage interest will cost all landlords £800 after tax relief. 

The wear and tear allowance for furnished properties (currently an allowance of 10% of rents each year) is being replaced by a deduction for the actual cost of replacing furnishings. 

Finally, the rent a room relief which is the tax free amount that can be earned from renting out a spare room is increasing from £4,250 to £7,500. 

So, good news for first-time buyers in a property market with a limited supply or bad news for tenants who may be facing rent rises to compensate for landlords higher tax bills? No doubt time will tell….. 

For more information, please contact us on 01273 701200 or info@plusaccounting.co.uk 

 

Written by Karen Oliver, Tax Manager at Plus Accounting, Chartered Accountants

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